Building a new home in Illinois is exciting, but it opens a window where your property is more vulnerable than you might think. The framing is up, the roof is on, and no one's living there yet. Standard homeowners insurance doesn't cover it. That's where builders risk comes in.
But builders risk is just the start. Once you're in the home, the coverage question changes entirely. Here's how it actually works, from breaking ground to your first policy.
What builders risk insurance actually covers
Builders risk is a specialized property policy designed for buildings under construction. It covers the structure itself while it's being built, along with materials stored on-site or in transit to the job.
The policy typically covers:
- Fire damage
- Wind and hail damage
- Theft of materials on-site
- Vandalism
- Lightning strikes
- Damage from vehicle impact
What it usually doesn't cover:
- Employee theft or dishonesty
- Mechanical breakdown
- Flood or earthquake (those need separate policies)
- Normal settling or shrinkage
Coverage is written based on the value of the completed project, not the current state of construction. So if you're building a $600,000 home, your builders risk policy is typically written for $600,000 even on day one when only the foundation exists. That way, if a fire destroys partial framing and the materials staged on-site, you're covered for the full scope of what you'd need to restart.
Who needs builders risk and who buys it
If you're doing a custom build through a general contractor, the question of who buys the builders risk policy usually comes down to your contract with the builder.
Some contractors carry builders risk on every project they manage. In that case, you might be covered under their policy automatically and you don't need to buy your own. But you should verify this in writing before construction starts. If the contractor's policy has gaps or excludes certain types of losses, you're the one absorbing the difference.
Other builders expect the homeowner to purchase the policy. This is common with smaller or independent contractors. If your builder is quiet on the subject, ask directly: "Who carries builders risk on this project, and can I see the declarations page?"
If you're acting as your own general contractor (which some Illinois homeowners do on smaller projects), you almost certainly need to buy it yourself.
For spec homes in new subdivisions around DuPage County and the Chicago suburbs, the builder typically carries the policy until closing. But "typically" isn't the same as "always." Get it confirmed before you sign anything.
How builders risk is priced in Illinois
Builders risk premiums in Illinois generally run 1 to 4 percent of the total construction value per year. So for a $500,000 home, you might pay $5,000 to $20,000 for the full construction period.
The range is wide because pricing depends on:
- Location and local hazard risk
- Construction type (wood frame vs. steel or masonry)
- Length of the construction period
- Whether the site is secured and fenced
- Your contractor's experience and track record
- The specific coverage options selected
DuPage County construction projects tend to sit in the middle of that range. The suburban Chicago area has moderate storm risk, and most new construction in Naperville and surrounding communities is wood-frame residential, which carries a higher fire risk than steel or masonry.
Construction near bodies of water or in designated flood zones will cost more. Builders risk doesn't include flood coverage by default. If your new home is in or near a FEMA flood zone, you'll want to verify flood coverage separately during construction.
The timeline that trips people up
Here's where things get complicated. Builders risk covers the home during construction. But the moment you move in, or in many cases the moment the certificate of occupancy is issued, the builders risk policy expires or becomes void.
That window between "construction complete" and "homeowners policy in force" is where people get caught. It's not theoretical. Illinois homeowners have faced uncovered losses because their builders risk lapsed before their HO-3 started, or because they delayed shopping for homeowners insurance thinking they had more time.
The right sequence is to have your standard homeowners policy bound and effective on the same day your builders risk expires. That means working with your agent ahead of time, not calling for quotes the week you're moving in.
Your lender will require proof of homeowners insurance before closing anyway, so this usually gets sorted through the mortgage process. But if you're building on land you already own and carrying construction financing separately, the coordination is entirely on you. Don't assume someone else is managing that handoff.
What your first homeowners policy should cover
New construction has real advantages from an insurance standpoint. Everything's new: the roof, the electrical, the plumbing, the HVAC. Carriers like new homes because there's less deferred maintenance and fewer surprises. That translates to lower premiums compared to older homes of similar size.
For a new 2,500 square foot home in the Naperville or Wheaton area, expect homeowners insurance in the range of $1,800 to $2,500 per year. That's meaningfully less than the $2,400 to $3,200 range you'd see for an older home of similar value.
But lower premiums don't mean you should cut corners on coverage. New homes have their own vulnerabilities, and a few coverage decisions at the start set the tone for your whole policy.
Dwelling coverage. This should match your home's rebuild cost, not your purchase price. For new construction in DuPage County, rebuild costs run $175 to $250 per square foot depending on finishes and materials. A 2,500 square foot home might have a replacement cost of $440,000 to $625,000. Make sure your dwelling coverage reflects this, not just the appraised value.
Guaranteed replacement cost vs. replacement cost. Standard replacement cost coverage pays to rebuild at current prices up to your policy limit. Guaranteed replacement cost goes beyond the limit if construction costs run over. Given how much material and labor costs have moved since 2020, guaranteed replacement cost is worth the extra premium on a new build. If it costs more to rebuild than expected, you're not stuck eating the difference.
Extended replacement cost. If your carrier doesn't offer guaranteed replacement cost, extended replacement cost adds 25 to 50 percent above your dwelling limit as a buffer. It's a middle option between standard and full guaranteed coverage, and it's better than nothing.
Builder's warranty vs. insurance. Most new construction in Illinois comes with a builder's warranty: one year on workmanship, two years on mechanical systems (HVAC, plumbing, electrical), and ten years on structural defects. That's the standard under Illinois law for homes with a purchase price over $50,000. But a warranty isn't insurance. It covers defects in workmanship and materials. It doesn't cover storm damage, fire, theft, or liability. You need both.
New construction discounts you should actually get
One of the real financial benefits of a new build is insurance discounts. Many carriers offer meaningful price breaks for new homes that most buyers don't think to ask about.
New home discount. Some carriers offer 10 to 25 percent off for homes built within the past 10 years. The biggest discounts usually apply to homes under 5 years old. On a $2,200 base premium, a 20 percent discount saves $440 per year. Over a few years, that adds up to serious money.
Impact-resistant roofing discount. If your builder used Class 4 impact-resistant shingles on the roof, make sure your insurer knows. In Illinois, where hail is a consistent driver of claims, some carriers offer 5 to 20 percent discounts for Class 4 roofing. Ask your builder what class the shingles are rated before you close. It should be on the material spec sheet.
Central alarm discount. If your new home is prewired for a security system (and many new subdivisions in the Chicago suburbs are), you can connect it to a central monitoring station fairly cheaply. Carriers typically offer 5 to 15 percent off for monitored systems. The discount often covers the monitoring subscription cost entirely.
Smart home discount. Water leak detectors, smart thermostats, and connected smoke alarms are common in new builds now. Some carriers are beginning to offer small discounts for these, typically 2 to 5 percent. Not every carrier has formalized this yet, but it's worth asking at quote time.
Bundling. If you're moving from an apartment or another home, bundling your new homeowners policy with your auto insurance saves 10 to 20 percent on both. On a new construction home, where you're setting up a policy fresh anyway, there's no reason not to shop both at the same time.
What Naperville and DuPage County buyers should check specifically
New construction in the Naperville, Wheaton, and Lisle corridor tends to concentrate in subdivisions with homeowners associations. That creates a specific coverage question: what does the HOA's master policy cover, and what's left to you?
Most HOA master policies cover the common areas and the building's exterior. Some cover the individual unit structure (studs out). Others cover only the shared structure (walls in). If you're buying a new townhome or attached unit in DuPage County, get the HOA's master policy declaration and understand exactly where their coverage stops and yours begins.
The most common mistake is buyers assuming the HOA master policy covers their interior. It often doesn't. Water damage inside the unit, personal property, liability, and loss of use are typically your responsibility. An HO-6 policy (the condo and townhome form) fills those gaps for attached units.
For single-family new construction in traditional neighborhoods, the HOA coverage issue is simpler. The HOA maintains common landscaping and shared structures, but your home is fully your responsibility to insure.
Sewer and water backup. DuPage County has aging combined sewer infrastructure in some areas, and even in new developments, the connection to municipal systems can create backup risk. Standard homeowners policies don't cover sewer backup. A water backup endorsement runs $50 to $150 per year on a new construction policy. Given the basement depth of most DuPage County homes and the cost of a basement cleanup, this isn't coverage you should skip.
Service line coverage. New construction sometimes comes with underground service lines (water, sewer, electrical) that aren't covered by standard homeowners policies. These are usually the city's or utility's responsibility up to the property line, but everything from the property line to the house is yours. A service line endorsement fills this gap for $30 to $50 per year. On a brand new build, you'd hope the lines are in perfect shape, and they probably are. But it's still a relatively cheap protection for something that can cost thousands to repair.
Working with a lender on a construction loan
If you're financing construction with a construction-to-permanent loan, your lender will have their own requirements for both builders risk during construction and homeowners insurance at completion.
Most construction lenders require:
- Builders risk coverage equal to 100 percent of the completed project value
- The lender listed as additional insured or loss payee on the builders risk policy
- Proof of homeowners insurance bound before the final draw or closing
Some lenders will accept the builder's own builders risk policy if you're buying a spec home from a developer. Others want a separate policy in the buyer's name. Clarify this early with your loan officer so you're not scrambling in the last week.
If you're using a construction loan from a local community bank or credit union in the Chicago suburbs, expect them to be hands-on about documentation. They often have specific requirements for policy limits and additional insured language that your insurer needs to accommodate exactly.
Getting the transition right
The practical advice here is simple: don't handle the builders risk and the homeowners policy separately on a DIY basis if you can avoid it.
An independent agent can coordinate both. They can make sure your builders risk coverage is adequate during construction, that it's set to expire on the right date, and that your homeowners policy is bound and effective the moment you need it. They can also make sure you're getting the new construction discounts you're entitled to from day one, not three years later when you finally think to ask.
For new construction in the Naperville and DuPage County area specifically, the competitive market for homeowners insurance means there's real variation in pricing and coverage terms. The same home can get quotes ranging hundreds of dollars apart from different carriers. Comparing a few options before you commit to a policy at closing is worth the time.
New builds are actually a great moment to set yourself up right. Everything's clean. There's no history of claims. No deferred maintenance. No questionable roof or knob-and-tube electrical. Carriers compete for new homes. You're in a good position to shop, and you should use it.
If you've got a new build closing soon or a construction project underway and questions about how to structure coverage from start to finish, RateShield can help you pull quotes and make sure nothing falls through the gap between policies.